Obsession

The challenges didn’t end when buzzy online banking start-up Simple was purchased by Spain’s BBVA for $117 million earlier this year.

A draft internal document obtained by Quartz appears to show that Simple continues to grapple with the difficult task of acquiring and engaging new customers.

(Quartz received the document, apparently meant for an internal presentation, late last week as the result of an apparently misdirected email sent by a Simple executive. It’s not clear whether the summary of Simple’s key metrics for April 2014 changed in subsequent versions to the one Quartz received.)

The draft Simple document refers to 33,387 active customers in April, up 4.5% from March. But it notes that “customer acquisition is slower than expected” and “deposits per customer are growing slower than expected.”

Silicon Valley investors have singled out consumer finance and banking as an area ripe for disruption by more nimble technology-driven startups. That was the premise behind Simple—but the draft document appears to show how hard it is to gain deep traction with consumers, even for a company founded back in 2009. Regulatory hurdles are part of the story. And, as with startups in other areas, delivering on high-profile pledges to “disrupt” huge swaths of American industry isn’t always as easy as it looks.

When news broke in February that Spain’s BBVA would buy Simple, the purchase price raised eyebrows in the banking world. At the time of the acquisition, the online-banking start-up—whose founders included former top Twitter developer Alex Payne, who has since departed—had roughly 100,000 customers, according to reports. American Banker noted:

For BBVA, the real value is in Simple’s name and demographic. If it was after technology alone, BBVA could have built a platform in a few months for half a million dollars, [banking consultant Serge Milman] says. Instead it paid $117 million for a company with 100,000 customers, or $1,200 per customer.

In the draft document obtained by Quartz, the company doesn’t break out an overall customer number, focusing instead on the active customer count of 33,387. (Given that the internal document notes a 29.2% active rate among consumers, that should put the total customer count around 114,000.) A dotted line, presumably indicating growth projections for active customers, suggests the company aims to increase its active customers to roughly 80,000 by the end of 2014.

In the past, Simple executives have noted that regulatory issues act as a constraint on customer growth. In 2012, Simple co-founder and CEO Joshua Reich told the Oregonian, the hometown paper in Portland, Oregon, where Simple is now based: “Part of having a bank account is we need to know who our customers are, from a regulatory perspective.”

Simple’s internal document suggests those constraints remain in place. Using the short-hand “KYC”—an abbreviation often used in financial circles for so-called “know-your-customer” rules—the report notes “total approved customers growth is negatively impacted by large & growing rejection rate.” In a separate section, along with a chart showing a declining “application KYC approval rate,” the report says “decreasing approvals impacting ability to scale.”

As background, while Simple has branded itself as a modern-day, mobile version of a bank, the actual day-to-day banking operations—including processing the paperwork needed to start new accounts—have been conducted Simple’s partner, a Delaware-based, FDIC-insured institution known as the Bancorp Bank. Simple accounts continue to be housed at Bancorp, according to Simple’s website.